Luxury Home Demand Surges as Affordable Housing Crisis Intensifies in India
Home prices in India are rising faster than expected, driven by affluent buyers, while the affordable housing market continues to lag. Rising rentals are pricing out first-time buyers, deepening inequality and straining the middle class.
Housing CrisisReal EstateLuxury HomesAffordable HousingProperty MarketReal Estate NewsSep 17, 2025
Although India witnessed 7.8% growth last quarter, among the fastest globally, it has failed to translate into broader prosperity. A concentration of well-paying jobs in a handful of cities and stagnant wages elsewhere has left many aspiring homeowners unable to enter the market.
“The current problem is strong macro numbers have not benefited the population at the lower side of the pyramid and they are at a disadvantage,” said Ajay Sharma, managing director of Valuation Services at Colliers. “Their disposable incomes have stagnated.”
This inequality is spilling into the housing sector. While premium properties are thriving, the affordable segment continues to lag. Knight Frank estimates India faces a shortfall of 10 million affordable homes today, a deficit that could triple by 2030.
According to the Reuters survey, average home prices in major Indian cities are set to rise 6.3% in 2025 and 7.0% in 2026, after a 4.0% gain in 2024. That outlook is higher than June’s forecast of 6.0% and 5.0% respectively.
The upward trend comes despite monetary policy easing. The Reserve Bank of India cut its benchmark rate by 100 basis points this year to 5.50%, but the relief is proving insufficient.
“Recent rate cuts may ease mortgage payments slightly, but home prices are rising 7% to 8% nationally, with sharper increases in markets such as the National Capital Region and Bengaluru,” said Avneesh Sood, director at Delhi-based Eros Group. “With the market leaning heavily toward premium and luxury homes, entry-level buyers are likely to be priced out, even with policies that look good on paper.”
As ownership becomes more elusive, rentals are climbing sharply. Analysts expect average urban rents to rise between 5% and 8% over the coming year, faster than consumer inflation.
“As affordability in both core and suburban areas are on the decline, more people are renting – and as more people rent, rentals have gone up,” Sharma added.
The Reuters poll revealed a split among experts on whether affordability for first-time buyers will improve or worsen in the coming year. Ten of the 19 respondents expected some improvement, while nine saw conditions deteriorating — a sharp shift from June, when most were optimistic.
Experts warn the current tilt toward premium housing has lasting social and economic consequences.
“Only a small fraction of the population is actively engaged in the property market,” said Pankaj Kapoor, managing director of real estate research firm Liases Foras. “Post-financialisation in real estate, we have not improved affordability; we have worsened it to the point where the qualifying age to purchase a property has risen from around 30–40 years to 45 years old.”
He added bluntly: “Crony capitalism starts with land ownership. So how can cities, where the rich control the land, create affordable housing? That’s why housing doesn’t give you choices – it gives you frustrated options.”
For India’s aspiring middle class, the dream of home ownership is slipping further away, even as the nation’s growth story shines on paper.
Frequently Asked Questions
What is driving the rise in home prices in India?
The rise in home prices is primarily driven by demand from affluent buyers, outpacing the supply of affordable housing. This trend is exacerbated by a concentration of well-paying jobs in a few cities and stagnant wages in other areas.
How is the affordable housing market performing in India?
The affordable housing market is lagging significantly. India faces a shortfall of 10 million affordable homes, and this deficit is expected to triple by 2030, according to Knight Frank.
What impact have recent rate cuts had on the housing market?
Despite the Reserve Bank of India cutting its benchmark rate by 100 basis points to 5.50%, the relief has been insufficient. Home prices are still rising at a rate of 7% to 8% nationally, with sharper increases in some regions.
How are rental prices being affected?
Rental prices are climbing sharply as more people are unable to afford home ownership. Analysts expect average urban rents to rise between 5% and 8% over the coming year, faster than consumer inflation.
What are the long-term implications of the current housing market trends?
The current tilt toward premium housing has lasting social and economic consequences. It is deepening inequality and making home ownership more elusive for the middle class, with the qualifying age to purchase a property rising from around 30-40 years to 45 years old.
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